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2019 (5) TMI 1185 - AT - Income TaxAddition on account of valuation of closing stock - method of valuation prescribed u/s 145A - matching principal of accountancy - assessee did not add the excise duty on closing stock of its finished goods, contending that the liability accrued, was not due on its stock of finished goods, as on 31/3/2014 - AO added the liability, holding that the assessee had not followed the method of valuation prescribed by section 145A - CIT- A deleted the addition - HELD THAT:- The statutory auditors/independent auditors of the company have not qualified their report in respect of the valuation of stock of finished goods, as well as of the raw material, and they have also not qualified their opinion in respect of either the accounting policy adopted by the company in relation to the valuation of stock, or the accounting of the sales and the purchases made by the assessee company. The method prescribed by the Accounting Standard is called the ‘exclusive method’ and the method prescribed in section 145A of the Act is called the ‘inclusive method’. Hence, although the method of valuation of stock followed by the assessee company is not in conformity with the prescription u/s 145A, the deviations will have no effect on the profit & loss account of the relevant financial year. No excisable item of the closing stack of the assessee was removed from the factory premises till the end of the accounting year. Thus, following the net method of valuation of closing stock, excise duty has rightly been excluded from the value of closing stock of finished goods at the end of the accounting period. The assessee has consistently followed the method of accounting adopted by it. The method of valuation of closing stock is at cost or net realizable value, whichever is lower. In valuing the stock, the excise duty, etc., are not added to the purchases, sales or valuation of inventories. In view of the above, finding that the ld. CIT(A) has correctly deleted the addition wrongly made, the impugned order is confirmed and the grievance sought to be raised by the Department is rejected, being shorn of merit.
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